On January 2, 2017, Perpetual Industries acquired 70% of Sawyer Corporation's voting stock. Total goodwill of $1,000,000
Question:
On January 2, 2017, Perpetual Industries acquired 70% of Sawyer Corporation's voting stock. Total goodwill of $1,000,000 was recognized at the date of acquisition, allocated $750,000 to the controlling interest and $250,000 to the noncontrolling interest. Sawyer's reported assets and liabilities had book values that approximated fair value at the date of acquisition, but it had previously unreported customer lists (5 year life. SL) valued at $500,000. It is now December 31, 2021. Five years after the date of acquisition.
Additional information is as follows:
• For 2021, Sawyer reported income of $600.000. Goodwill impairment for 2021 is $200,000. Sawyer sells merchandise to
Perpetual at a markup of 25% over cost.
Perpetual's beginning inventory for 2021 includes $800,000 in merchandise purchased from Sawyer.
Perpetual's ending inventory for 2021 includes $1000,000 in merchandise purchased from Sawyer. Total sales from Sawyer to Perpetual were $2.500,000.
Perpetual sold land to Sawyer in 2018 for $780,000:
Perpetual reported a $250,000 loss on the sale. Sawyer still holds the land.
Required:
(1). Calculate 2021 equity in net income of Sawyer, reported on Perpetual's separate books, and the 2021 noncontrolling interest in net income of Sawyer, reported on Perpetual's consolidated financial statements. Show your computations.
(2) Prepare the working paper eliminations made in consolidation at December 31, 2021 related to the intercompany transactions.
Expert Answer:
1 a Equity in net income of Sawyer reported on Perpetuals separate books Total Perpetuals share 70 o... View the full answer
